New build.. applying for 2 mortgages? Is this legal?

Daniel_gecko

Hi all.

I am buying a new build which is scheduled to be finished in around 7 months. However I have been told I need to apply and be approved for a mortgage in order to exchange the contracts within the next 28 days.

My mortgage adviser has told me that if I apply now and pay application fees such as a £99 booking fee and a £400 valuation fee.. the mortgage offer will likely expire before the house is finished and I run the risk of having to reapply and spend another batch of money on the application fees.

I have been advised to apply for a completely fee-free mortgage with a poor interest rate now so that I am mortgage approved and able to exchange contracts within the next fortnight.. and then in 4-5 months time I will simply ignore the first application and apply to a new & better mortgage elsewhere.

Is this illegal or unscrupulous?

Also - when I apply for a mortgage and they say the offer lasts a number of months... is it the interest rate itself that is guaranteed for that number of months or only the offer to lend the money?

BadgerFace_2

It is the offer itself that is guaranteed for x months.

You run the very real risk, as many previously have found out, of not being able to secure a second mortgage after the first has expired.

The other problem with going for a high rate fee free mortgage is that it is 'easier' to get a high rate mortgage, so when you come to apply for a better mortgage, it may be declined, leaving you up the creek.

If you do go ahead with this, you need some kind of clause in the contract saying after 6 months, the completion becomes subject to satisfactory mortgage.

GMS

Walk away.

6 months is a long time and if you are committed to buy at £x you may not be able to secure a sufficient mortgage in 6 months.

New build lending is restricted and any change in criteria could leave you up the proverbial creek.

Find a place which is already built, or to be completed within a couple of months.

Any mortgage you apply for should be the correct one, not just to see if you can.

CloudCuckooLand

Just tell the developer you will exchange when it is ready. Or not at all.

What if you lost your job in the intervening period? Even if you immediately got another, you may be on probation for 6 months, and unable to secure a mortgage - but still be expected by the developer to find the funds, or be sued...

PaulLuke

Absolutely walk away. We were in a similar position a number of years ago, when it was far easier to obtain finance. Even then there was no way we were willing to exchange on a property that was being built until we had a definate completion date. By contrast the developer wanted us to commit to a purchase on the basis that they would notify us when the build was complete and expect us to complete the purchase one month later.

As it transpired the build date kept getting pushed back and from initially being told the house would be completed in March we were told it would probably be sometime around November(ish)!! That was when we told them thanks, but no thanks!!

Annisele

To add to the chorus...walk.

The real risk isn't that you have to spend more money on fees in 7 months time. The risk is that you can't get a mortgage at all - because your circumstances have changed, because lending criteria have changed, because the lender doesn't believe the property is worth what you promised to pay 7 months ago, or for one of a zillion other reasons.

If you exchange and then can't get a mortgage, you're stuffed - you're still legally obliged to pay the price you agreed.

DVardysShadow

https://forums.moneysavingexpert.com/discussion/3142062

OP Cross posted